Eurozone growth forecast for this year and next cut by OECD

29 May 2013 13:45[Source: ICIS news]

LONDON (ICIS)--Eurozone GDP will contract by 0.6% this year and expand by 1.1% in 2014 as growth remains constrained by the lingering effects of the economic crisis, the Organisation for Economic Co-operation and Development (OECD) said on Wednesday.

The OECD’s Economic Outlook report paints a bleaker picture than its previous one in November last year which forecast that eurozone GDP would shrink by 0.1% in 2013 and grow 1.3% in 2014.

“Euro area growth remains constrained by the lingering effects of the euro area crisis, the ongoing drag from fiscal consolidation and weakness in credit markets,” its latest report said.

US GDP will grow 1.9% this year and by 2.8% in 2014, the OECD said, largely unchanged from its previous twice-yearly outlook.

GDP growth in 2013 for the OECD’s 34 member countries as a whole is expected to be 1.2%, down from 1.4% in the previous report, while predicted growth next year was unchanged at 2.3%.

The OECD said additional easing of monetary policy was needed in the eurozone, with interest rates “reduced as much as possible”.

Earlier this month, the European Central Bank (ECB) cut its key interest rate to 0.50%, the first rate movement in 10 months.

Unemployment in the eurozone is forecast to be 12.1% in 2013, rising to 12.3% in 2014, the OECD said, before stabilising at a “very high level”.

“Downside risks to the outlook still dominate, even if they have narrowed as a result of actions by the monetary authorities in the euro area and the resolution of the fiscal cliff in the United States,” the OECD said.